October 22, 2020
Cognitive Decline Meets COVID-19 Scams
The federal government warns that older Americans are being targeted by a battery of financial scams, including telemarketers offering to do contact tracing – for a fee – or to reserve a slot for a future vaccine. Others are soliciting donations to charities purportedly helping people in need during the economic slowdown.
COVID-19 makes this a perilous time for people struggling with cognitive decline.
Few can escape a deterioration in their cognitive capacity as they age. It’s just a matter of degree and speed. But the faster it happens, the more damage it can do, the FINRA Investor Education Foundation concluded in a new study.
The study was based on surveys of more than 1,000 older residents in Chicago retirement communities and subsidized housing – average age, 80. The same people were periodically asked questions with varying degrees of difficulty about their general financial knowledge and investments and were asked to compare and calculate percentages.
The older people who either initially had less understanding of financial concepts or experienced a faster decline in their knowledge made poorer financial decisions in exercises that simulated real-world decisions.
This included a vulnerability to scams, which was assessed by asking the older people to agree or disagree with statements like this: “If a telemarketer calls me, I usually listen to what they have to say.” (Not recommended.) And this: “If something sounds too good to be true, it usually is” (Count on it.)
To prevent scams, older people – and their caregivers – need to anticipate the financial damage that cognitive decline can cause. …Learn More
January 29, 2019
Are We Able to Judge Financial Advisers?
Let’s get this out of the way first: the vast majority of financial advisers would not take advantage of you.
But that doesn’t eliminate the problem of discerning whether an individual adviser can be trusted. About 7 percent of U.S. advisers have misconduct records in civil or regulatory proceedings. If someone draws an unlucky card and picks a bad one, how would they know?
In certain situations, they might not. A new study finds that various things can trip people up and make them trust an adviser who is giving out bad advice. These influences included a good first impression of the adviser. And one way for an adviser to make a good first impression is by initially confirming the client’s own views on investing before introducing poor advice.
The subject of this study – judging the quality of financial advice – is important at a time workers are carrying a heavy load of responsibilities for managing their 401(k) accounts, and the accounts are becoming more critical to their retirement outlook.
The adviser study was conducted by an international group of researchers. Their online experiment was done in Australia, where employers are required to provide workers with a retirement savings and investment plan – Superannuation Accounts – similar to 401(k)s.
Trust is tricky to evaluate, and the researchers put a lot of thought into designing the experiment to minimize flaws in the results. They asked nearly 1,300 Australians to evaluate advice online about four investment topics. Under each topic, one adviser presented good advice, while the other presented bad. The researchers varied the order for presenting the good and bad advice to the participants.
They generally had a good sense of when they were getting good advice. But there were exceptions: …Learn More